NBC Sports Pro Football Talk reported that, in an unprecedented move, HBO’s new TV series Ballers will use the names and logos of NFL teams without a license from, or the consent of, the NFL. A spokesperson for HBO stated: “HBO is always mindful of other intellectual property owners, but in this context there is no legal requirement to obtain their consent.” The NFL has so far declined comment. If HBO’s legal analysis is correct, then why did so many past works such as Any Given Sunday and The Replacements use fictional team names and logos? This provides a good opportunity to explore the legal issues raised by the use of unlicensed trademarks in fictional works, as well as the key legal claims the NFL could make and HBO’s possible defenses.

Photo source: HBO

Trademark Infringement

Trademark infringement would be the most likely claim asserted by the NFL. Such a claim would probably involve the following three legal issues:

1. use in commerce;
2. likelihood of confusion; and
3. First Amendment rights.

The U.S. Trademark Act expressly requires a “use in commerce.” Courts are divided about what that phrase means. Some courts require that the symbol be used as a trademark, to identify goods or services, and not just as a reference within the goods or services. According to this view, Ballers’ use would not be a use in commerce because the NFL team names and logos are not used to identify the show or the studio, but only as a background to the show. But other courts, probably the majority, only require that some kind of use be made of the mark.

Second, a trademark owner must show likelihood of confusion. Confusion is not limited to who created the show; it is enough that the use of the trademark misleads the public into believing that the show is sponsored or endorsed by the trademark owner. In one famous lawsuit involving professional football, the Second Circuit Court of Appeals enjoined the pornographic film Debbie Does Dallas because the use of the Dallas Cowboys Cheerleaders’ uniforms and logos created confusion as to sponsorship.

So if the NFL team names and logos used in Ballers are mistakenly understood by the average viewer to mean the NFL has somehow sponsored or endorsed the series, then the NFL could have a good claim. The NFL as plaintiff would have the burden of proving HBO’s use of its marks has created a likelihood of confusion and both parties could present expert witness and consumer survey evidence to support their positions. It is hard to predict the results because prior cases involving mention of trademarks in films or television shows have reached different conclusions. For example, in contrast to the Debbie Does Dallas case, last year the Seventh Circuit Court of Appeals upheld dismissal of a claim that the use of the trademark “CLEAN SLATE,” referring to fictional software in the movie The Dark Knight Rises, created a likelihood of confusion with the plaintiff’s same mark for a real-life software product.

Third, federal courts have developed special rules regarding use of a trademark as part of an expressive work. These rules were first developed in a lawsuit brought by Ginger Rogers against the producer of the film Fred and Ginger. The Second Circuit Court of Appeals held that the First Amendment rights of the producer outweighed whatever rights Rogers had in her name and persona. According to the court, the public interest in avoiding confusion will usually not outweigh the First Amendment interests in free expression unless either:

1. the mark has no artistic relevance to the underlying work whatsoever; or
2. the mark has some artistic relevance, but use of the mark misleads as to the source of the work.

Applying that case to the football context, the Eleventh Circuit Court of Appealsheld in 2012 that use of University of Alabama‘s colors and logos in artistic depictions of football games (sold in paintings, prints and calendar reproductions) did not infringe the university’s trademarks in its uniform’s colors and logos.

This is probably HBO’s best argument. The use of actual NFL team names and logos is highly relevant to the central story of the show, and there is no indication that HBO intends to affirmatively mislead anyone about sponsorship (e.g., by using the logos in the opening credits).

Dilution, Blurring and Tarnishment

The Federal Trademark Dilution Act protects famous trademarks from uses that reduce, or are likely to reduce, the public’s perception that the marks signify something unique, singular or particular, even in the absence of any likelihood of confusion or competition. Dilution claims come in two types:

1. blurring, where the distinctiveness of a famous mark is impaired by association with another similar mark or trade name; and
2. tarnishment, where the reputation of a famous mark is harmed through unsavory or unflattering associations.

According to NBC Sports Pro Football Talk: “The first episode of Ballers focuses in part on an NFL player who has sex in the bathroom of a nightclub with a woman he had just met, and who then beats up a fan who confronts the player about keeping the bathroom occupied for an extended period of time.” Such plotlines might expose HBO to potential claims of dilution by tarnishment. However, such a claim would not be clear cut. Tarnishment cases usually involve overtly offensive subject matter, like pornography or close association with criminality. The description of the first episode, in contrast, seems like a hard-hitting depiction of real-life incidents of violence and sex, rather than empty titillation – more R-rated than X-rated.

One legal factor that would favor HBO is that most courts require use in a trademark capacity (i.e., to identify goods or services as emanating from a producer or source) before they will allow a dilution claim. Referential use of a mark within an expressive work would, according to most courts, not even qualify for a dilution claim.

Of course, HBO could also assert a First Amendment defense, raising similar arguments to those discussed above.

Defamation

Defamation is the communication of a false statement of fact that harms the reputation of an individual person, business, or other entity. To determine whether a plaintiff has been defamed, courts have generally required the following three elements:

1. communication of a false statement of fact to one or more other parties;
2. willful intent or negligence on the part of the defamer regarding the truthfulness of the statement; and
3. harm caused to the subject of the statement.

Defamation actions are not limited to aggrieved individuals. An organization like the NFL can be a plaintiff in a defamation lawsuit, too. The NFL may pursue claims against a fictional work such as Ballers if it is reasonable for viewers to believe that the organization in the series is intended to portray the real-life NFL. But any claimed defamation would have to be directed at the NFL as such (e.g., if the NFL is depicted as a corrupt entity that engages in illegal activities). Portrayals of football players who engage in domestic violence or other criminal behavior would not by itself constitute defamation against the NFL.

A disclaimer that Ballers is not meant to depict any real-life persons or entities would not automatically exculpate HBO from such claims, but it would still be a good idea for HBO to include such a disclaimer as it could be used as evidence that it is in fact not reasonable for viewers to believe that the organization, characters and teams in the fictional series are intended to portray the real-life NFL, its players and teams.

Even if the NFL is able to successfully claim the use of its team names and logos in connection with distasteful plotlines is tantamount to false statements of fact, it would still have to prove that:

1. the false statements of fact were made without adequate research into the truthfulness of the statements; and
2. the NFL’s reputation was actually harmed by HBO’s false statements.

The NFL would have to prove it suffered real economic harm, such as lost ticket sales or other business opportunities, as a result of the negative depiction of the NFL on the show. The law does not permit organizations to claim hurt feelings or other emotional injuries. Nor does it allow recovery for damages that are merely speculative. The NFL would have to prove its damages by providing evidence establishing to a reasonable certainty the nature and extent of the economic loss it sustained or will in the future sustain.

Finally, truth is a defense to any claim of defamation, and a defamation plaintiff bears the burden of proving falsity. HBO would be free to introduce evidence that its depiction of the NFL is true or substantially true, and if believed, would completely relieve it of liability for defamation claims.

Conclusion

There are many nuances to the legal issues surrounding the use of unlicensed trademarks in fictional works. The NFL could raise trademark and defamation claims, but HBO would have a variety of possible defenses. Avoiding the foregoing issues and potential claims is the precise reason why the film and TV industry usually either procures a trademark license or changes names and includes standard disclaimers in title cards and credits essentially stating “All names appearing in this work are fictitious. Any resemblance to real persons or entities is purely coincidental.”

Tal Benschar is a partner in the law firm of Springut Law, and practices all types of intellectual property law. He has represented such companies as Gucci, Cartier, Montblanc and Van Cleef and Arpels, both before the PTO and in federal courts.

Although it is not unique or even uncommon for music artists to separate from their bands, Zayn Malik’s announcement last week that he left One Direction was startling to many people including, but by no means limited to, a large number of tweenage and teenage girls worldwide. The news about Malik and One Direction provides a good opportunity to explore how bands and record labels prepare for and handle member departures.

Between Music Artists And Their Bands

Every band is, either by design or by default, a legal entity (e.g., partnership, limited liability company, etc.) that operates similarly in many ways to other businesses. As such, band members contribute their skills and other resources; purchase and own assets; incur expenses; receive revenues; and share profits. So when a member leaves a band, like other businesses, the parties must allocate and divide the assets, liabilities and future revenues. Many times, bands prepare for such an eventuality in advance and explicitly include provisions in their operative documents (e.g., partnership agreement, operating agreement, etc.) as to how the members agree to divide their assets, liabilities and future revenues in the event a member separates from the band. Otherwise, the parties will have to rely on default applicable laws and/or negotiate from square one and settle upon the terms of their separation at the time a member actually leaves the band (similar to getting divorced without a prenuptial agreement previously in place).

One Direction (Photo credit: Wikipedia)

A band’s assets usually include equipment, cash, unsold merchandise and vehicles, the value of which, along with the band’s liabilities (e.g., outstanding loans, tax liabilities, etc.), are used as a basis to determine an appropriate purchase price for the leaving member’s ownership interest in the applicable entity. In addition to compensation for such ownership interest, leaving members are generally entitled to ongoing payments from certain revenue streams of the band including:

1. record royalties (e.g., the leaving member’s share of royalties from sales and licenses of master recordings embodying the leaving member’s performances);

2. publishing royalties (e.g., royalties earned from exploitations of compositions authored, in whole or in part, by the leaving member); and

3. merchandise income (e.g., income from products manufactured by the band or under license, which may or may not be limited to items featuring the name or likeness of the leaving member).

Another important issue in connection with a leaving member is determining who gets to use the band’s trademarks and goodwill. Often, the remaining members retain ownership of the band’s trademarks and the leaving member is permitted to state that she/he is a “former member of” the relevant band, but is prohibited from forming a new band with the same or a confusingly similar name, or otherwise using the band’s name, symbols, logos, slogans and related marks. This issue gets more complicated when multiple members of a band leave together, but we will leave that issue for another day.

Recording agreements generally grant the record label exclusive rights to the personal services of each member of a band as a recording artist. While a record label cannot force a leaving member to continue providing the label with such member’s personal services during the term of a recording agreement, the label does have the right to prevent such member from providing her/his services as a recording artist to any other record label during the term of the recording agreement. Of course, such an outcome could be really harmful to an artist without providing a commensurate benefit to the record label. Consequently, bands and record labels often agree to include a so-called “leaving member provision” in their recording agreements stating that the record label has an option for a certain period of time after the leaving member’s departure (e.g., 90 days) to sign such member individually to a new recording contract on the same or similar terms as the band’s recording agreement, but with reduced financial terms and percentages (e.g., 75% of the advances, recording funds and royalties contained in the band’s recording agreement). If the record label does not exercise its option within the stated period of time, the leaving member would be free to sign with and perform for anyone else. In such event, representations, warranties, grants (e.g., the label’s right to continue to use the leaving member’s name and likeness in connection with master recordings embodying the leaving member’s performances) and other survivable provisions in the band’s recording agreement remain in full force and effect and binding on both the record label and leaving member, but the leaving member no longer has any obligation to provide services to the record label.

We hope this summary of the key issues involved in a band member’s departure provides some “direction” on the process.

]]>http://www.forbes.com/sites/oliverherzfeld/2015/03/30/how-one-direction-and-other-bands-handle-leaving-members/feed/0New York’s Highest Court Opens Pandora’s Boxhttp://www.forbes.com/sites/oliverherzfeld/2015/03/16/new-yorks-highest-court-opens-pandoras-box/
http://www.forbes.com/sites/oliverherzfeld/2015/03/16/new-yorks-highest-court-opens-pandoras-box/#commentsMon, 16 Mar 2015 13:51:00 +0000http://blogs.forbes.com/oliverherzfeld/?p=3051New York’s highest appeals court has recently ruled against the family of jazz legend Duke Ellington in its lawsuit against music publisher EMI. [tweet_quote display="NY's highest court set the stage for contracting parties to take advantage of a remarkable definition interpretation"]In so doing, the court set the stage for contracting parties to take advantage of a remarkable definition interpretation.[/tweet_quote]

Background

In 1961, a predecessor of EMI and, according to the wording of the contract’s preamble, “any affiliate of [EMI’s predecessor],” entered into a standard songwriter royalty contract with Ellington. The agreement requires EMI to pay Ellington and his family 50% of all net revenues actually received by EMI from sales outside the U.S., after the deduction of fees paid to foreign subpublishers. At the time the agreement was executed, all of the foreign subpublishers were unaffiliated with EMI’s predecessor. However, due to industry consolidation, the foreign subpublishers are now all affiliates of EMI. When Ellington’s family discovered that EMI is paying 50% of the royalties generated from foreign sales to EMI’s affiliates, and only splitting the remaining 50% with Ellington’s family (i.e., EMI and its affiliates receive 75% and Ellington’s family only receives 25% of the royalties generated from foreign sales), Ellington’s family commenced a lawsuit against EMI essentially accusing it of “double-dipping.”

New York’s lowest court dismissed the complaint holding that the term “affiliates” in the agreement’s definition of Ellington’s contractual counterparty includes only those affiliates in existence at the time that the contract was executed. New York’s Appellate Division affirmed the lower court’s ruling and Ellington’s family appealed to New York’s highest court.

Duke Ellington (Photo credit: Wikipedia)

The Decision

On appeal, New York’s Court of Appeals affirmed the two previous decisions holding: [tweet_quote display="The term 'affiliate' includes only those affiliates in existence at the time that the contract was executed"]“Absent explicit language demonstrating the parties’ intent to bind future affiliates of the contracting parties, the term ‘affiliate’ includes only those affiliates in existence at the time that the contract was executed[/tweet_quote] . . . Furthermore, the parties did not include any forward looking language. If the parties intended to bind future affiliates they would have included language expressing that intent. Absent such language, the named entities and other affiliated companies of EMI’s predecessor which existed at the time are bound by the provision, not entities that affiliated with EMI after execution of the Agreement.”

The Implications

This decision is very troubling because many existing contracts governed by New York law do not explicitly state that the definition of “affiliate” binds future affiliates of the contracting parties. [tweet_quote display="The ruling in this case could invite parties to create new affiliates to evade contractual obligations & prohibitions"]Consequently, if applied broadly, the ruling in this case could invite parties to create new affiliates to circumvent contractual obligations and prohibitions, and evade the parties’ original understandings, intentions and bargained-for exchange.[/tweet_quote] Of course, virtually every agreement is still bound by the implied covenants of good faith and fair dealing, but within those boundaries the potential and temptation for mischief will be ever-present. To be clear, exposure to this type of abuse would not be limited to royalty-bearing license agreements. Indeed, this decision sets the stage for potential foul play in the context of agreements for professional services; loan agreements; merger and acquisition transactions; non-compete and non-disclosure agreements; and every other type of agreement that may involve affiliates of the parties.

The Lessons For Contracting Parties

As a best practice, licensors should always either explicitly prohibit related party transactions with a licensee’s affiliates or retain the right to reject any such related party transaction that the licensee cannot show to be equivalent or superior to one conducted at arm’s length with an unrelated third party. [tweet_quote display="Contacts should explicitly define “affiliates” to includes new affiliates after the effective date of the agreement"]And, more generally, contacts governed by New York law that are intended to include prospective affiliates should explicitly state that the definition of “affiliates” includes any entity that conforms to the definition as of the effective date of the agreement, as well as any entity that conforms to the definition any time after the effective date of the agreement.[/tweet_quote] Doing so, will help avoid situations where parties are surprised to discover that it don’t mean a thing if their contract definitions ain’t got that swing!

]]>http://www.forbes.com/sites/oliverherzfeld/2015/03/16/new-yorks-highest-court-opens-pandoras-box/feed/2License Agreement Territory Exclusivityhttp://www.forbes.com/sites/oliverherzfeld/2015/01/05/license-agreement-territory-exclusivity/
http://www.forbes.com/sites/oliverherzfeld/2015/01/05/license-agreement-territory-exclusivity/#commentsMon, 05 Jan 2015 14:36:00 +0000http://blogs.forbes.com/oliverherzfeld/?p=3025Trademark license agreements sometimes include a grant of an exclusive territory. The question is, does an exclusive territory provision mean that only the licensor is prohibited from selling licensed products into the licensee’s territory or does the exclusivity also prohibit the licensor’s distributors against selling licensed products into the territory? And what if an unrelated third party licensee violates the exclusivity? Would that constitute a breach of the licensor’s obligations under the original license agreement containing the exclusivity provision? The Seventh Circuit Court of Appeals’ recent decision in TMG Kreations v. Peter Seltzer provides some important guidance regarding the answers to these questions.

Background

In the late 1990s Peter Seltzer registered the word “Kashwére” as a trademark for chenille products. In 2009, due to a material adverse change in financial position, Seltzer sold his company’s assets, including the Kashwére trademark, to TMG Kreations. As part of the transaction, TMG granted Seltzer an exclusive license to sell chenille products under the Kashwére name in Japan. Thereafter, the parties’ relationship devolved into litigation involving a series of claims and counterclaims. One of Seltzer’s claims is that TMG knew that some of its distributors were reselling in Japan and assisted such distributors in such sales. The district court dismissed the entire dispute on cross-motions for summary judgment and both sides appealed.

Source: http://www.rakuten.com/

The Decision

On appeal, the Seventh Circuit noted that the only express limitation on distribution in the parties’ agreement is the prohibition against TMG making direct sales to Japanese customers. Nothing explicitly required TMG to prevent resales in Japan by its distributors as the parties’ license agreement was silent on that issue. The court considered whether such a provision implicitly forbids “a roundabout process by which exclusivity is destroyed by resale by other distributors to whom the grantor of the exclusive distributorship sells.” [tweet_quote display="Contracts which restrict the free and unlimited exchange of services or commodities are strictly construed"]It essentially held that “contracts which restrict the free and unlimited exchange of services or commodities are strictly construed, and the restrictions will be extended no further than the language of the contract absolutely requires[/tweet_quote] . . .[T]he burden of proving that the license had some implicit term limiting non-Japanese distributors of Kashwére products from reselling in Japan was on Seltzer, who failed to produce any persuasive evidence of it.”

The Seventh Circuit assumed that “if in an attempt to take over the Japanese market TMG had encouraged, assisted, bribed, etc. its distributors to resell in Japan, and to that end to buy more Kashwére products from TMG than they would otherwise have done,” such actions would have constituted a material breach of TMG’s implied covenants of good faith and fair dealing that are read into every agreement. In this case, TMG did have knowledge of its distributors’ sales in Japan and actually assisted them by providing them with “hang tags” in Japanese to affix to the Kashwére products they were selling in Japan. However, the court found nothing to indicate TMG actually encouraged its distributors to resell Kashwére products in Japan. On that basis, the court concluded that there is no evidence of bad faith by TMG and affirmed the district court’s dismissal of Seltzer’s claim regarding exclusivity.

Source: store.shopping.yahoo.co.jp

Licensees Instead Of Distributors

Query, would the court have arrived at a different result if the sales into Seltzer’s exclusive territory were made by other licensees of TMG instead of distributors? In general, distributors buy merchandise for resale, whereas licensees are granted the right to manufacture and sell merchandise bearing a licensor’s intellectual property. [tweet_quote display="if a licensor grants an excl territry to 1 licensee it impliedly is promisng not to grant the same territry to others"]So, if a licensor grants an exclusive territory to one licensee it impliedly is promising not to grant the same territory to other unrelated licensees.[/tweet_quote] The court cited, but did not follow the ruling of, a prior case where a party was held liable for violation of an exclusive sales agency agreement where it was shown that the sale of goods into the plaintiff’s exclusive territory was not made directly by the defendant but it had knowledge that the destination of the goods was within the exclusive territory. I believe that precedent suggests the limits of a licensor’s liability in a situation where a subsequent licensee sells into an exclusive territory granted to a prior licensee (i.e., in breach of the subsequent licensee’s agreement or with the full knowledge and permission of the licensor). In particular, the licensor may be held liable if it has knowledge of and actively facilitates the sales by the subsequent licensee. But a licensor should not be held liable if the subsequent licensee violates the licensor’s exclusive grant under the original license agreement without the licensor’s knowledge or permission.

The Lesson For Contracting Parties

With 20/20 hindsight, of course Seltzer should have negotiated for the inclusion of an explicit provision requiring TMG to forbid its distributors to resell to Japanese customers. More generally, this case is an important reminder to contracting parties to avoid simply filling in the blanks, or casually agreeing to the terms, of generic form trademark license agreements. Instead, parties would be well advised to engage legal counsel with significant experience in licensing to appropriately draft the terms and conditions of each agreement based on the specific circumstances of the proposed transaction. Particular attention should be paid to tailoring the provisions involving the licensed marks, licensed articles, licensed territory, permitted distribution channels, contractual term, and any exclusions or limitations thereto, to properly clarify and memorialize the parties’ intent, and to specifically spell out what conduct will be expected of the contracting parties to engage in, or refrain from, as they move forward with their proposed transaction. Doing so will help avoid future territorial and other disputes between the parties and avoid unpleasant trips to the courthouse.

]]>http://www.forbes.com/sites/oliverherzfeld/2015/01/05/license-agreement-territory-exclusivity/feed/0American Defamation Hustlehttp://www.forbes.com/sites/oliverherzfeld/2014/11/03/american-defamation-hustle/
http://www.forbes.com/sites/oliverherzfeld/2014/11/03/american-defamation-hustle/#commentsMon, 03 Nov 2014 16:05:00 +0000http://blogs.forbes.com/oliverherzfeld/?p=2962Paul Brodeur, an investigative science writer and author, commenced a lawsuit last week against the producers and distributors of the film American Hustle. Brodeur claims he was defamed by a scene in the film that mentions his name. The case raises a number of interesting legal issues that I will try to clarify.

Elements Of Defamation

What are the elements of a successful claim of defamation? To determine whether a person has been defamed, courts have generally required the following three elements:

1. Communication of a false statement of fact to one or more other parties;
2. Willful intent or negligence on the part of the defamer regarding the truthfulness of the statement; and
3. Harm caused to the subject of the statement.

I will consider each element in turn.

Publication Of A False Statement

In one of the most memorable scenes in the film, Rosalyn (Jennifer Lawrence) causes a kitchen fire by placing an aluminum foil-wrapped dinner in the microwave. She tells her husband, Irving (Christian Bale) that microwaves take all the nutrition out of food. “That’s bull****,” he answers. She then takes out a magazine and replies, “It’s not bull****. I read it in an article. Look, by Paul Brodeur…”

In real life, Brodeur previously wrote about the dangers of microwaves, but he never claimed they take all the nutrition out of food. So, inclusion of the scene will probably be viewed as publication of a false statement. However, is the scene a false statement of fact? The film is a fictional work inspired by the events involving the 1970s Abscam (short for “Abdul scam”) scandal. It is not a documentary and it does not claim everything it portrays is true. In fact, before the action begins, the film displays the message “Some of this actually happened.” The more customary opening title card for movies of this sort reads “based on a true story.” Brodeur may claim the atypical message should be taken literally to mean the producers of the film want the audience to believe portions of the film, including the kitchen scene, are indeed based on fact. But the film’s producers will probably explain such message puts the audience on notice that many events portrayed in the film, including the kitchen scene at issue, are fictional and diverge from what actually transpired in real life.

Brodeur may, in turn, question why the film used his real name when it went out of its way to change the names of all the key protagonists, as follows:

The defendants will probably explain the changed names as further evidence of the fictional nature of the film. But Brodeur will likely claim the use of his real name was a false statement of fact and an intentional attempt to make him the butt of a joke in the scene.

Truthfulness Of The Statement

For the second element, Brodeur must prove that the false statement of fact was made without adequate research into the truthfulness of the statement. In the case of public officials, influential figures and famous personalities, the legal standard is set much higher with the plaintiff having to prove “actual malice,” which means a specific intent to do harm or with reckless disregard for the truth. [tweet_quote display="The US Supreme Court held that defamation law must be balanced against the interests of the First Amendment."]The higher standard was introduced by the U.S. Supreme Court in a landmark decision based on the principle that defamation law must be balanced against the interests of the First Amendment.[/tweet_quote] In this case, the defendants will point out that Brodeur is a science journalist whose writings have appeared in The New Yorker for close to four decades. They will likely claim that Brodeur’s status as a well-known and influential writer triggers the higher standard, which will significantly increase the burden on Brodeur to prevail on this key element of the case.

Columbia Pictures

Damages Suffered By The Plaintiff

The basis and rationale behind defamation law is to provide a remedy for injuries to a plaintiff’s reputation. Consequently, those suing for defamation must provide evidence that their reputations were actually harmed by the defendants’ false statements of fact. For example, a plaintiff must prove she lost her job or other employment opportunities; was rejected and avoided by colleagues and/or former friends, or was hounded, harassed and assailed by the media or others. In this case, Brodeur claims to have suffered $1 million in damages. Even if Brodeur is able to surmount the hurdles of the first two elements, he is still going to have to back-up his claim of monetary damages because [tweet_quote display="The law does not permit a recovery of damages that are merely speculative."]the law does not permit a recovery of damages that are merely speculative.[/tweet_quote] In particular, a defamation plaintiff must prove her damages by providing evidence establishing to a reasonable certainty the nature and extent of the probable loss she has sustained or will in the future sustain. Losses cannot be demonstrated by conjecture, indeterminate estimates or mere assumptions, but must be substantiated by concrete facts.

Conclusion

The defendants have not commented on the lawsuit yet, but I think they have a reasonable likelihood of success based on the challenges Brodeur will face in proving the viewing audience believed the fleeting reference to him was a statement of fact and, as a result, he suffered an actual injury that is material enough to trigger a judicial remedy. Nonetheless, if this dispute is not resolved at an early stage such as at summary judgment, the most likely conclusion will be a confidential settlement agreement involving a payment to Brodeur, as well as a possible removal of his name from future copies of the film. Such a resolution will allow the parties to avoid having to expend time, money and resources engaging in a protracted legal dispute, as well as exposure to the possibility of liability for monetary damages and/or injunctive relief as part of an adverse ruling. [tweet_quote display="American Hustle Defamation Lawsuit: One could reasonably ask who really hustled whom?"]In such an event, one could reasonably ask who really hustled whom?[/tweet_quote]

]]>http://www.forbes.com/sites/oliverherzfeld/2014/11/03/american-defamation-hustle/feed/3New Uses Under Old License Agreementshttp://www.forbes.com/sites/oliverherzfeld/2014/09/22/new-uses-under-old-license-agreements-2/
http://www.forbes.com/sites/oliverherzfeld/2014/09/22/new-uses-under-old-license-agreements-2/#commentsMon, 22 Sep 2014 19:04:00 +0000http://blogs.forbes.com/oliverherzfeld/?p=2901[tweet_quote display="Does a license agreement’s grant include new technologies that did not exist at the time of initial formation?"]A common problem in interpreting long-term license agreements is considering whether the language granting the license encompasses later-developed technologies and other new uses that did not exist at the time of initial contract formation.[/tweet_quote] For example, does a grant of exclusive publication rights in book form over 40 years ago also comprise the right to publish e-books after the establishment of an e-book market? That question was decided in the recent case of HarperCollins v. Open Road.

The Background

In 1971, HarperCollins’ predecessor entered into an agreement with author Jean George to publish the award-winning novel Julie of the Wolves. The agreement’s key provisions include:

* Clause 1 that grants to HarperCollins “the exclusive right to publish” the novel “in book form”;
* Clause 20 that states “the Publisher shall grant no license without the prior written consent of the Author with respect to the following rights in the work: use thereof in storage and retrieval and information systems, and/or whether through computer, computer-stored, mechanical or other electronic means now known or hereafter invented…”; and
* Clause 23 that states “[i]t is understood and agreed that the Publisher shall have the exclusive right to sell, lease or make other disposition of the subsidiary rights in which he has an interest under the terms of clause…20”.

In 2011, Ms. George contracted with Open Road to publish Julie of the Wolves as an e-book. In response, HarperCollins filed suit against Open Road alleging copyright infringement and other claims.

The Legal Standard

[tweet_quote display="Under NY law, the key interpretive principle in new use cases is that the language of the contract itself governs."]Under New York law, the key interpretive principle in new use cases is that the language of the contract itself governs.[/tweet_quote] Extrinsic evidence is usually irrelevant because (i) so many years later, it is often difficult “to consult the principals or retrieve documentary evidence to ascertain the parties’ intent,” and (ii) the parties’ intent “is not likely to be helpful when the subject of the inquiry is something the parties were not thinking about” at the time the agreement was signed. Whether foreseeability of the new use at the time of contracting is required remains an open question under existing case law.

First edition 1972

The Decision

Based on a plain reading of the contract language, the court held that the agreement grants HarperCollins exclusive rights to e-books. In particular, Clause 23 grants HarperCollins the exclusive right to issue licenses for the items covered under Clause 20, and Clause 20 explicitly addresses rights in the work stored via “computer…or other electronic means now known or hereafter invented.” The reference to computer storage and “[t]he phrase ‘now or hereafter known,’ when referring to forms of reproduction, reveals that future technologies are covered by the agreement” and that the language “creates an expansive rather than a restrictive conveyance of rights” sufficiently broad to include e-books within HarperCollins’ exclusive rights.

The court contrasted its decision with the holding in a prior case, Random House v. Rosetta Books, which limited a grant to paper book publication. In that earlier case, there was no mention of electronic exploitation and the grant “to print, publish and sell” was viewed as a restrictive conveyance of rights, not an expansive one, because the inclusion of the word “print” had “a limiting effect and a strong connotation of paper copy.”

The Lesson For Contracting Parties

[tweet_quote display="One of the most important provisions of any license agreement is the grant language!"]One of the most important provisions of any license agreement is the grant language.[/tweet_quote] The phrasing of what is included and what is excluded can make all of the difference in the world. Consequently, licensees should seek a broad conveyance of rights with expansive language and phrases such as “including, but not limited to,” “whether similar or dissimilar to the foregoing,” and “by any means and in any media, form, format or version now known or hereafter devised.” On the other hand, licensors should seek a restrictive conveyance of rights with phrases such as “limited solely to” and a provision explicitly reserving and retaining any and all rights not expressly granted to the licensee. In this way, each party’s rights will be properly addressed, no matter what the future holds.

]]>http://www.forbes.com/sites/oliverherzfeld/2014/09/22/new-uses-under-old-license-agreements-2/feed/2Kaskade And Michelle Phan: Burn The Copyright Law!http://www.forbes.com/sites/oliverherzfeld/2014/07/23/kaskade-and-michelle-phan-burn-the-copyright-law/
http://www.forbes.com/sites/oliverherzfeld/2014/07/23/kaskade-and-michelle-phan-burn-the-copyright-law/#commentsWed, 23 Jul 2014 19:38:00 +0000http://blogs.forbes.com/oliverherzfeld/?p=2713A lawsuit was just commenced by Ultra Records against beauty guru Michelle Phan for using unlicensed music from Ultra’s artists in her YouTube videos. The case presents a number of legal questions that I will try to clarify.

Is it a problem that one of Ultra’s artists featured in Phan’s videos has taken her side?

The performer Kaskade whose work is featured in a number of Phan’s videos did indeed state: “Copyright law is a dinosaur, ill-suited for the landscape of today’s media.” He also tweeted: “I’m not suing @MichellePhan + Ultra Records isn’t my lap dog. I can’t do much about the lawsuit except voice my support for her. I find that @MichellePhan has great taste in music *ahem*, and knows secrets on how to make my eyes really POP. What’s not to like?” However, Kaskade sold all of his rights to Ultra so, to a certain extent, he really does not have a dog in this fight. It’s two sides of the same coin. Artists like Richard Prince who borrow heavily from others’ works may advocate for the abolishment of copyright laws, while other artists whose livelihoods depend on the protection of their works via copyright laws would likely have a different point of view.

Does the YouTube generation not understand their obligations under copyright law?

[tweet_quote display="Copyright laws are complex & many people don't know where to draw the line between permissible & non-permissible uses"]The copyright laws are complex and many people do not know where to draw the line between permissible and non-permissible uses.[/tweet_quote] For example, in a dispute between Stephanie Lenz and Universal Music Corporation, Lenz posted on YouTube a 29 second video of her children dancing to Prince’s song “Let’s Go Crazy.” Universal sent YouTube a takedown notice pursuant to the Digital Millennium Copyright Act and Lenz claimed fair use. In this case, however, Phan’s use is more commercial. She has 6.7 million YouTube subscribers and her videos have been viewed over 150 million times. If Phan conservatively receives $1 for every 1,000 views, that would total $150,000 in earnings so far. Additionally, she may earn between $10,000 and $15,000 per product placed and/or endorsed in her videos. And, by virtue of her online popularity, she launched her own beauty aid company, EM-Cosmetics. But to the casual viewer, it may not be clear how the facts in the two cases are materially different and impact the parties’ obligations under copyright law.

Michelle Phan (Photo credit: Gage Skidmore)

Where do we draw the line between cute baby videos that go viral and professional beauty vloggers?

[tweet_quote display="The fair use defense was created bec not every act that might violate a copyright should amount to an infringement"]Courts have long recognized that not every act that might violate an owner’s copyrights should amount to an infringement, so the fair use defense was created to limit the scope of copyright through an equitable rule of reason.[/tweet_quote] The U.S. Copyright Act provides, in relevant part, that “the fair use of a copyrighted work, including such use by reproduction in copies…, for purposes such as criticism, comment, news reporting, teaching…, scholarship, or research” is not considered an infringement. Fair use is not, however, limited to the listed purposes. Rather, the courts look to the facts of each particular case and weigh and balance the following four factors to determine whether the particular challenged activities constitute a fair use or an infringement:

1. the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes and whether the use is transformative or simply derivative;
2. the nature of the copyrighted work, including whether it is fiction or nonfiction and published or not published;
3. the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
4. the effect of the use upon the potential market for or value of the copyrighted work.

No one factor is dispositive. Instead, each factor is weighed as part of an equitable rule of reason. Nonetheless, the fourth factor, the effect upon the potential market, has historically been the most important.

Whereas, cute baby videos are usually noncommercial, Phan’s work product is clearly commercial and she is likely earning substantial amounts from her online endeavors. So I do not think it is unreasonable for Ultra to insist on Phan procuring a license to use the music in her videos.

Kaskade (Photo credit: Mitch Doner/Manningmbd)

Should record labels do a better job of educating users of their legal obligations?

Users of copyrighted works should ideally know the law and record labels should do their best to educate the public. But we are living in a generation that believes information should be free, and availability and access should be instantaneous. Phan, through her lawyers, claims her videos have actually promoted Ultra’s music artists and “showcased [them] to an international audience.” [tweet_quote display="People know if everyone illegally uses music without a license the music companies will ultimately go out of business"]Of course, deep down, people do understand that if everyone illegally downloads/uses music and does not pay for a license, the record companies will not be able to continue producing quality work product and will ultimately go out of business.[/tweet_quote] At the same time, record labels have suffered mightily starting with unlawful Internet file sharing services such as Napster, bittorrent peer-to-peer services such as The Pirate Bay, and drastically diminishing revenues as a result of decreased CD sales and significantly lower royalties from legitimate online download and streaming services such as iTunes and Spotify. So music companies should continue their efforts to educate the public and try to win their hearts and minds. But, at some point, in the absence of compliance, records labels will reasonably feel compelled to fight to enforce their rights.

Is this a game changer or watershed moment for music companies?

The record labels have historically pursued infringers and will continue to do so. They look at who is using their music and must judiciously pick their spots and choose their battles. It is like the urban legend that Willie Sutton said he robbed banks “because that’s where the money is.” Since Phan has 6.7 million YouTube subscribers and 150 million views, she has naturally become a larger target. [tweet_quote display="When it comes to copyright law, with great success comes great responsibility!"]With apologies to Spider-Man, when it comes to copyright law, with great success comes great responsibility![/tweet_quote]

]]>http://www.forbes.com/sites/oliverherzfeld/2014/07/23/kaskade-and-michelle-phan-burn-the-copyright-law/feed/9Spirit v. Led Zeppelin: Analysis Of The “Stairway To Heaven” Infringement Lawsuithttp://www.forbes.com/sites/oliverherzfeld/2014/05/21/spirit-v-led-zeppelin-analysis-of-the-stairway-to-heaven-infringement-lawsuit/
http://www.forbes.com/sites/oliverherzfeld/2014/05/21/spirit-v-led-zeppelin-analysis-of-the-stairway-to-heaven-infringement-lawsuit/#commentsWed, 21 May 2014 17:50:00 +0000http://blogs.forbes.com/oliverherzfeld/?p=2657A lawsuit was just commenced by the band Spirit against Led Zeppelin claiming the iconic guitar arpeggio opening of “Stairway to Heaven” infringes Spirit’s 1968 instrumental track “Taurus.” The case presents a number of complex copyright law issues that I will try to clarify.

Statute of Limitations

Led Zeppelin first released “Stairway to Heaven” approximately 43 years ago, so the first question is, what is the statute of limitations for copyright infringement? Under The U.S. Copyright Act, civil infringement actions must be “commenced within three years after the claim accrued.” The three year rule would effectively bar any recovery for alleged infringement during the first approximately 40 years of the song’s release and limit any potential recovery to new formats/releases of the recording over the last three years, as well as any future new formats/releases of the recording. This could still be very meaningful because published estimates peg the song’s historical earnings (including both sales and royalties) at over $562 million (i.e., averaging over $13 million per year). And part of Spirit’s lawsuit seeks an injunction to prohibit a scheduled reissue of Led Zeppelin’s albums that have been completely remastered by guitarist and producer Jimmy Page.

Elements Of Copyright Infringement

Many listeners are convinced that Led Zeppelin copied the “Stairway to Heaven” opening directly from Spirit’s “Taurus.” Others believe the two works share commonplace musical elements and “Taurus” features a chord progression that is not protectable by copyright law. So the next question is, what are the elements of a successful claim of copyright infringement? To determine infringement, courts have relied on the following two-prong test:

1. Copying of a prior work; and

2. A substantially similarity to the prior work sufficient to constitute improper appropriation.

I will consider each element in turn.

Led Zeppelin (Photo credit: Wikipedia)

Copying

Copying can be proven by either direct evidence (e.g., a party’s admission) or circumstantial evidence. Many courts allow copying to be circumstantially proven with a two-part analysis based on evidence of access and similarity. The amount of access and similarity required to determine whether copying took place are inversely proportional. In other words, the more access a party had to a prior work, the less similarity must be shown to prove copying. Similarly, the more similarities that exist, the less access must be shown to prove copying. In this case, there is ample evidence of access since it is well-documented that the two groups performed together the day after Christmas 1968 and four additional times in 1969, all at concerts and festivals where Spirit played “Taurus.” Where there is evidence of both access and similarities, the trier of fact must determine whether the similarities are sufﬁcient to prove improper appropriation in the eyes of the law.

Substantial Similarity

[tweet_quote display="Copying is not enough to prove copyright infringement.There must also be a substantially similarity to the prior work"]Proof of copying is necessary but not sufficient to determine copyright infringement. There must also be a substantially similarity to the prior work sufficient to constitute improper appropriation, where “substantial” means substantial in degree as measured either qualitatively or quantitatively and “similarity” means similar in the ears of the ordinary member of the intended audience.[/tweet_quote] In the case at hand, should it reach the trial court, both parties will presumably present expert witnesses to analyze the respective recordings and testify how they are similar or dissimilar. However, the trier of fact will ultimately have to base its decision, not on the expert testimony, but on whether the works are “substantially similar” in the ears of ordinary members of the listening audience.

Affirmative Defenses

If Spirit is able to meet the legal standard of proof of copyright infringement, Led Zeppelin would likely raise one or more affirmative defenses. [tweet_quote display="Led Zeppelin could claim the chord progression in “Taurus” is not original or not protectable under copyright law."]For example, Led Zeppelin could claim the chord progression in “Taurus” is not original or not protectable under copyright law.[/tweet_quote] Similarly, it could try to prove that the opening of “Stairway to Heaven” was independently developed by Led Zeppelin without reference to “Taurus.” Any borrowing from “Taurus” could be deemed a “de minimis use” that is so minor as to be disregarded in the eyes of the law. However, a copy would usually be considered de minimis only if it is so meager and fragmentary that the average listener would not recognize its original source.

Some suggest that short portions of compositions incorporated into recordings should be covered under the “fair use” limitations to copyright law to the extent they are insubstantial and their use is unlikely to adversely affect sales of the originals. However, copyright owners are entitled, not just to sales of their originals, but to license their works for remuneration. So I would argue that such a defense would amount to an improper appropriation of owners’ license rights without compensation.

[tweet_quote display="#StairwaytoHeaven intro may be transformative use bec every work in some way borrows & builds on what has come before"]A variation on the fair use defense would be to consider Led Zeppelin’s introduction to “Stairway to Heaven” a “transformative use,” since every original work in some way borrows and builds upon what has come before.[/tweet_quote] A potential problem with such a defense is that some courts hold that a use qualifies as transformative only if it comments on, criticizes or parodies the original, which is probably not applicable here. Nonetheless, in a recent decision, the Second Circuit rejected any requirement that to be entitled to a copyright “fair use” or “transformative use” defense, an allegedly infringing work must comment on, or critically refer back to, the original copyrighted work.

Robert Plant and Jimmy Page of Led Zeppelin (Photo credit: Wikipedia)

Application

As discussed above, Led Zeppelin had access to “Taurus” before “Stairway to Heaven” was composed. [tweet_quote display="Can Spirit prove copying in the eyes of the law & substantial similarity in the ears of the listening audience?"]The question is, are the similarities between the two works sufficient to prove “copying” in the eyes of the law and “substantial similarity” in the ears of ordinary members of the listening audience?[/tweet_quote] If so, Led Zeppelin will be held strictly liable for copyright infringement, even if its copying was completely unintentional and accomplished subconsciously. If not, the court will determine that there are no similarities between the compositions other than commonplace musical elements.

Likely Conclusion

To avoid having to expend time, money and resources engaging in a protracted legal dispute, as well as exposure to the possibility of liability for monetary damages and/or injunctive relief as part of an adverse ruling, the most likely conclusion to this dispute will be a confidential settlement agreement involving a payment or series of payments to Spirit, as well as granting writing credit for “Stairway to Heaven” to Spirit guitarist Randy California. That is precisely how Led Zeppelin resolved prior claims of copyright infringement brought by third party artists regarding other Led Zeppelin songs including “Whole Lotta Love,” “Babe I’m Gonna Leave You,” “The Lemon Song,” and “Dazed and Confused.”

Most people know that when one party breaches a contract the other party may sue for its provable damages. But what if the non-breaching party does not suffer any losses? If a breach actually provides a benefit to the other party, would the benefit preclude the recovery of monetary damages? The recent Delaware court decision in the case of Fletcher v. Ion Geophysical provides some useful guidance on this important question.

Background

In the fall of 2009, Ion entered into a multi-part transaction valued at between $195 million and $245 million to provide it with desperately needed liquidity, enable it to continue operating and avoid bankruptcy. Fletcher had a contractual right to consent to a relatively small portion of the larger transaction, namely, the issuance of securities by an Ion subsidiary in consideration of a $40 million bridge loan, but Ion failed to solicit or obtain Fletcher’s consent. The overall transaction was expected to benefit Fletcher immensely and Fletcher faced financial disaster itself if Ion went into bankruptcy. Nonetheless, Fletcher sued Ion for failing to seek and secure its consent.

Competing Hypothetical Negotiations

An earlier opinion in the litigation held that Fletcher could pursue a claim for monetary damages and the precise amount would be resolved by “determining the amount Fletcher would have received in a hypothetical negotiation regarding its asserted right to consent.” In response, the parties constructed the following two competing versions of the hypothetical negotiation. Fletcher’s version portrayed Fletcher as a tough negotiator that would have refused to grant its consent unless Ion agreed to pay almost two dollars to Fletcher for every dollar of bridge financing (i.e., $78 million in exchange for its consent to a bridge financing that totaled only $40 million)! In Fletcher’s scenario, Ion is perceived to be a weak and hapless negotiator that was desperate and would have done anything to close the deal, including acceding to all of Fletcher’s demands in full. In Ion’s version of events, it would have found an alternative way to structure the bridge transaction that would not require Fletcher’s consent, thereby not obligating Ion to pay Fletcher anything.

Hypothetical Negotiation (Source: Pixabay.com)

The Decision

The court characterized both parties’ positions as “cartoonish” and “simplified caricatures of how they believe the negotiators would have behaved.” It pointed out that in a recent unrelated case, another consent holder overplayed its hand regarding a breach of its consent rights and, as a result, was determined to be “entitled only to nominal damages of $1.00 because the actions taken in violation of the plaintiff’s consent right did not harm, and actually benefited the plaintiff.” Nonetheless, the court took a middle-of-the-road approach here and held Ion liable to pay Fletcher $300,000, representing three times what certain other existing lenders of Ion received in consideration for their consent to permit the bridge financing to proceed.

The Lesson For Contracting Parties

This case is a wake-up call for contracting parties to avoid willfully breaching contract provisions in situations in which the other party benefits from the breach or, at a minimum, does not suffer any damages. In particular, monetary damages for contract breaches are determined by the reasonable expectations of the parties before the breach occurred and such expectations may include a payment from the breaching party in consideration of the other party’s consent to any modification to, or alteration of, the original contract terms. Even if it is ultimately determined that no monetary damages (or nominal monetary damages) are appropriate, the breaching party would still be exposed to the possibility of injunctive relief and other non-monetary remedies. Consequently, a party considering a potential breach would be well-advised to first seek the advice of competent legal counsel. Doing so would help avoid having to expend time, money and resources engaging in a formal legal dispute, as well as the possibility of liability for damages and other remedies as part of an adverse ruling.

]]>http://www.forbes.com/sites/oliverherzfeld/2014/04/23/when-a-breach-is-a-benefit/feed/0Protecting Food Creationshttp://www.forbes.com/sites/oliverherzfeld/2014/03/07/protecting-food-creations/
http://www.forbes.com/sites/oliverherzfeld/2014/03/07/protecting-food-creations/#commentsFri, 07 Mar 2014 16:41:00 +0000http://blogs.forbes.com/oliverherzfeld/?p=2328The New York Times, the BBC and the Guardian have all reported on chefs who either discourage, regulate or outright prohibit customers from taking pictures of the food they order. The chefs’ grievances range from a breach of etiquette and disruption to ambiance caused by customers climbing on chairs and engaging in other antics to get the best angle, irritation and annoyance suffered by other patrons subjected to the glare of flashes, poor quality pictures reflecting negatively on the chefs’ creations, and the fact that photograph-taking elongates dining times causing a loss of business through fewer turns. One additional objection involves claims that so-called “food porn” posted to social media somehow infringes on the chefs’ intellectual property rights. This provides a good opportunity to review the U.S. laws relating to the protection of food creations including recipes and plating.

Copyright Law

U.S. copyright law extends protection to “original works of authorship fixed in any tangible medium of expression.” An important limitation on the scope of copyright protection is contained in the so-called idea/expression dichotomy. According to the U.S. Copyright Act “[i]n no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.” In other words, copyright law protects the expression of ideas in any tangible medium, but not the ideas themselves. As a result, courts have denied copyright protection to recipes, deeming them to be statements of an idea, procedure and process and not original works of expression.

Source: Flickr. Photo credit: cumi&ciki

With respect to culinary creations and plating, the U.S. Copyright Act deems the design aspects of “useful articles” (e.g., clothing, furniture and, presumably, food) protectable “only if, and only to the extent that, such design incorporates pictorial, graphic, or sculptural features that can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the article.” Courts have established that the test for separability may be met by showing either physical or conceptual separability. A design element would be considered physically separable if it could somehow be removed from the food and sold separately, and conceptually separable if it comprises artistic features that do not contribute to the utilitarian aspect of the food and such features invoke an idea separate from the functionality of the food. Thus, I believe the unique design of food creations and plating could be deemed legally protectable sculptures that are conceptually separable from the nutritional value, good taste and other utilitarian aspects of the underlying food itself.

Trademarks and Trade Dress

The U.S. Trademark Act does not provide protection for food creations per se. Instead, trademark law protects brand names, designs and other elements of food products, and trade dress law protects the design, shape, color, packaging and appearance of food products, solely to the extent that they identify the source and origin of the owner’s products. For example, the name of a chef’s signature dish could be registered as a protectable trademark and unique culinary creations and plating could be registered as protectable trade dress if they identify the chef as the source and origin of such products. However, in addition to identifying the source and origin of the owner’s products, trademarks and trade dress must also have distinctive character to be eligible for registration and protection. Trademarks and trade dress are deemed to be “inherently distinctive” if they immediately communicate to a consumer that they are identifying the source and origin of a product, as opposed to describing the product itself. Alternatively, distinctiveness may be acquired through “secondary meaning,” a process whereby consumers come to recognize the trademark as a source identifier over a period of time. Trade dress protection of packaging may be acquired through inherent distinctiveness or secondary meaning. However, trade dress protection of designs that are deemed not to be “packaging” may only be acquired through secondary meaning. The question is should unique food plating be considered packaging or product design? The answer is not at all clear and could make a serious difference in the timing of legal protection available to a chef. In particular, if a chef’s choice of plates and arrangement are considered the “packaging” of a food product, the plating may be eligible for instant protection as an inherently distinctive trade dress. However, if food plating is considered part of the overall food product design and not packaging, the plating will not be eligible for trade dress protection until sufficient time elapses for the design to acquire secondary meaning.

Source: Wikipedia

Trade Secrets

A trade secret is any formula, pattern, device or compilation of information that is used in a business, which gives its owner an opportunity to obtain an advantage over competitors. In order to obtain protection of a trade secret, reasonable steps must be taken under the circumstances to treat it as a secret. To the extent a chef’s recipes remain a secret, trade secret laws could be effective in protecting them indefinitely. However, to the extent such recipes are disclosed to third parties in the absence of a non-disclosure obligation, the trade secret protection would be lost. One of the most famous examples of a trade secret is the recipe for Coca-Cola. It is known to only a few employees of The Coca-Cola Company who are all subject to significant non-disclosure obligations. And the only written embodiment of the formula is kept in the vault of a bank in Atlanta, Georgia.

What Should Chefs Do?

Chefs should engage competent legal counsel and consider (i) federally registering copyrights for the design elements of their creations as sculptures that are conceptually separable from the useful aspects of the underlying food products, (ii) federally registering for trademark protection of the names and/or trade dress protection of the designs of their signature dishes, and (iii) taking active steps to maintain the confidentiality of recipes as trade secrets that provide a competitive advantage over competitors through mandatory nondisclosure agreements with employees and other reasonable measures to preserve the secrecy of their recipes. Doing so would help chefs maximize the protection their culinary creations and edible art.